In most cases, payments received by the franchisor from the franchisee will be the franchisor’s assessable income (net of any GST component) for income tax purposes. Payments from the franchisee to the franchisor generally include:
initial franchise fee
franchise renewal fees
franchise service fees/royalties
advertising fees
transfer fees, and
training fees.
The payments will generally also include a goods and services tax (GST) component if the franchisor is GST registered. The franchisor will need to report and send the GST to the Tax Office. If the franchisee is GST registered, the franchisee will generally be able to claim a GST credit from the Tax Office for the GST amount included in the supplies listed above.
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